MH Employment Update

Friday 9 December 2016

Rocky Times Ahead For The Gig Economy?

There has been a lot of attention in the media recently about the so-called gig economy, that is, the method of working in which temporary positions are common and organisations contract with independent workers for short-term engagements, as opposed to the traditional employment model. Two recent news items have highlighted the considerable unrest and legal uncertainty in this sector.

App-based taxi provider Uber hit the headlines at the end of October when an employment tribunal held that two of its drivers were not self-employed contractors as Uber claimed, but were ‘workers’. This meant they are entitled to the national minimum wage, paid annual leave and whistleblower protection. Uber’s arguments that it is merely a technology platform as opposed to a transport provider and that its drivers are self-employed contractors offering their services to passengers via the Uber app were rejected comprehensively.

The tribunal was clearly unimpressed with Uber, saying that it resorts in its documentation to ‘fictions’, such as fake invoices that it generates on behalf of its drivers but that are never sent to passengers, and ‘twisted language’ in its contracts with drivers. The tribunal considered that Uber’s case – that the driver enters into a contract with each passenger directly to provide the transportation service – did not accord with reality. Uber exerts a great deal of control over its drivers, which helped tip the balance towards worker status. Uber is appealing, and strictly the judgment applies only to the two Claimants, although it may encourage some of its 40,000 other drivers to make similar claims, with inevitable cost to Uber.

More recently, it was also announced that the Independent Workers Union of Great Britain has written to Deliveroo, the app-based takeaway delivery service with over 3,000 people working for it, asking for recognition in respect of a number of its riders working in a section of London. Whilst there is no suggestion that Deliveroo’s arrangements are anything like as enigmatic as Uber’s, they do treat individual delivery riders as independent contractors, rather than workers.

The novel aspect here is that a union can only be recognised in relation to a group of people if they are workers or employees. If Deliveroo declines to recognise the union, the application will (the union says) be taken to the Central Arbitration Committee (CAC), the body which is empowered to decide these matters. Since the union could not be recognised if the riders are independent contractors (and not workers or employees) the CAC would have to decide what category the riders fall into – potentially bringing a large number of Deliveroo riders into the protection of worker status in one fell swoop – arguably a more far-reaching tactic than in the Uber case, where the judgment strictly applied only to the two drivers who brought the claims.

Since workers are entitled to the minimum wage and holiday pay, this could have a significant impact on Deliveroo’s business model, and other companies who utilise this labour model will be very concerned to see how things progress.

The services offered by the likes of Uber and Deliveroo are very popular, in part because of their convenience – which comes from technological innovation – and also because they are inexpensive, which is in part because of the costs-savings involved in utilising the gig economy model, which is now under threat. Whether customers would pay the extra in order to pay for the employment rights of the ‘workers’ is yet to be seen. It is unlikely that we have seen the end of such activism in this sector.